What Does "Draft" Mean on a Bank Statement?
"Draft" on a bank statement usually refers to a check that has been written and cashed, but hasn't cleared the banking system yet. It's an intermediary stage in the check processing lifecycle. Here's a breakdown:
Understanding the Process
- Writing the Check: You write a check to someone, and they deposit it into their account.
- Check Processing: The recipient's bank processes the check and sends it to your bank.
- Draft Status: Your bank receives the check and registers it as a "draft" in your account. This means the money is temporarily reserved, but not yet deducted from your balance.
- Clearing the Check: Your bank verifies the check and deducts the funds from your account. The "draft" status is then removed.
Why You Might See "Draft" on Your Statement
- Delayed Clearing: Checks can take a few business days to clear, especially if they are drawn on banks in different locations or are sent through the mail. During this period, they appear as "draft" on your statement.
- Large Checks: Large checks might take longer to clear due to additional security measures or processing requirements.
- Weekend or Holiday Processing: Banks typically don't process checks on weekends or holidays, so they might appear as "draft" until the next business day.
Key Points to Remember:
- Draft Status is Temporary: The "draft" status is temporary. Once the check clears, the funds will be deducted from your account, and the "draft" entry will disappear.
- Available Balance: The "draft" status doesn't affect your available balance immediately. You still have access to these funds, but they could be frozen if the check bounces later.
- Reconciling Your Account: It's important to keep track of "draft" entries when reconciling your bank statement with your own records. This helps you identify any discrepancies and prevent potential overdrafts.
If you have any questions or concerns about a "draft" entry on your bank statement, don't hesitate to contact your bank directly. They will be able to provide you with more specific information and guidance.